SHEIN, Temu fight lawsuit battle, opponents are fierce and it’s too hard to defend towers
The conflict between SHEIN and Temu has resurfaced, and this time the battle has spread to the UK.
Documents filed by SHEIN in London’s High Court in August reportedly show that it has “identified thousands of cases” where Temu sellers have allegedly stolen images from SHEIN’s platform in order to sell their own products, thereby creating unfair competition.
SHEIN wants the court to order Temu to ban its sellers from copying its images and to take down all items that allegedly infringe on its images, and to demand £100,000 in damages, according to the documents.
This is the first legal clash between the two in the UK, following several court battles between Shein and Temu in the US.
Predictably, as Temu continues to expand its market presence, entering markets such as Southeast Asia, Latin America, and the Middle East, the conflict between the two parties will become more and more heated.
After all, the two business model has become more and more similar, both take the route of cost-effective, low-priced products, the main source of profit for the purchase and sale price difference. temu to women’s clothing and daily necessities as the core categories, SHEIN is to women’s clothing started at the end of last year to turn to the platform model of two cross-border e-commerce platforms rely on China’s rich supply chain resources, a steady stream of low prices for the manufacture of its products. Behind this “infringement”, there is actually a deeper meaning. As Shein and Temu’s user base grows to a certain size, the final competition will inevitably be for products with limited supply chains. The same picture is just the appearance, more important is who can get the picture behind the supplier.
first cut a low price competition
In Shein, Temu’s low-priced product strategy knife cut in their own body.
After Temu officially landed in the U.S. market last year, the platform shelved a lot of SHEIN’s same products in advance, and pulled down the price to 53%-80% of SHEIN’s, and even the price of some single products was as low as 30%. At the time of the 2022 Black Friday sale, the price of the goods in Temu’s platform is almost only 50% off the price of the same model of SHEIN.
Comparable, SHEIN in the past few years are to fast new, not more than 10 U.S. dollars of the average unit price to attract a large number of European and American consumers. Data shows that only two companies, Primark in Europe and Forever 21 in the US, have been able to consistently match their prices.
Temu has completely changed that dynamic, citing in its July filing against Shein that similar products on its platform are typically priced 10-40 per cent lower than Shein’s. Temu believes it is “better positioned than any other company to challenge Shein’s dominance of the U.S. and to provide better value to consumers. “
The reason for this is probably Temu’s firm control over its suppliers.
Guoxin Securities introduced, in terms of price, relying on Jinduoduo accumulated more than 11 million suppliers, Temu can directly reach the end of the supply chain, with the lowest price in the same category to obtain the brand of homogeneous sources, the formation of price advantage. In addition, in order to ensure the price advantage of the platform, Temu has the core price control of the goods, and the platform can constantly adjust and optimise the price according to the sales data of the goods.
In inventory management, in order to reduce the pressure on inventory, Temu launched the JIT pre-sale mode in November 2022, and sellers can choose between the VMI mode of “stocking first and then ordering” and the JIT mode of “ordering first and then shipping”. In the JIT mode, sellers do not need to prepare goods in advance to the warehouse, but according to the actual sales order delivery, after the order merchants need to be shipped within 24 hours, the goods need to be within 48 hours to Temu’s domestic official warehouse. In addition, Temu’s strict management of inventory and sales, long-selling products need to be reduced or withdrawn from the supply, the strict requirements of the inventory to enhance the efficiency of Temu’s cross-border supply chain.
Temu’s requirements for suppliers are very strict, constantly prompting merchants to make concessions to provide the platform with the lowest-priced products. According to Kasumi News Agency, one merchant mentioned that after the first price verification passes and smooth shipment, the buyer will ask the merchant to reduce the price again with the reason that the same type of lower-priced product appears, otherwise it will not be put on the shelves, directly return the product, and the merchant will pay for the return shipping fee. At the same time, on Temu only sufficiently low-priced goods can get more traffic, sales.
In terms of marketing and promotion, there are two 30-second brand advertisements on the Super Bowl, the “Spring Festival Gala of the United States”, followed by large-scale, high-frequency promotions on the platform to continuously acquire customers and inspire users to buy; and some of the platform’s Some products on the platform have large discounts, such as hundreds of products in the women’s clothing category with discounts of more than 80% and other preferential activities.
SensorTower data shows that Temu continues to top the iOS App Store and Google Play shopping app download charts in North America.
Goldman Sachs analyst Eric Sheridan said that by the end of the second quarter, Temu had 120 million downloads globally, with more than 70 million in the United States, where it was first introduced.
That’s truly unprecedented growth. The problem is that Chinese suppliers can’t expand their SKUs indefinitely either, and eventually the supply chains of Temu and Shein are bound to overlap. And so the conflict intensified.
A backhanded “exclusivity agreement”?
SHEIN is trying to maintain its moat while watching the tiger’s eye.
In mid-July, Temu’s lawsuit unveiled Shein’s response strategy.
At the time, Reuters news agency said Temu, a cross-border e-commerce platform of Poundland, filed a new lawsuit against fast-fashion apparel rival SHEIN in the U.S. federal court in Boston, alleging violations of U.S. antitrust laws.
Temu claims in the suit that SHEIN “used its dominant market power to force apparel manufacturers to enter into exclusive agreements that prevented them from working with Temu.” As of May, “SHEIN has required approximately 8,338 manufacturers that supply or sell on the SHEIN platform to sign exclusive distribution agreements. This prevents these manufacturers from supplying products on Temu’s platform or to sellers on Temu’s platform.”
Temu said these 8,000-plus manufacturers supplying SHEIN account for 70-80 per cent of the total number of merchants capable of supplying ultra-fast fashion.
Temu says that Shein has adopted at least four tactics to curb competition, including fining suppliers who work with Temu and forcing suppliers to sign “loyalty oaths”.
In fact, decades of experience in fast fashion have made it possible for Shein to indirectly influence Temu’s attack on the fashion category from a supply chain perspective.
In terms of supply system, SHEIN has established a flexible supply chain system with quick return of small orders, and provides three different modes of co-operation for garment suppliers, namely ODM, OEM and FOB, which integrates the productivity of a large number of upstream factories, and builds up a multi-level and dynamic supplier co-operation system.
SHEIN will use Google Trends Finder and other big data tools to gain insights into consumer demand, identify and anticipate fashion trends, pull the planning side from the demand side, and then launch the products in small batches in the market, adjusting them according to the demand side, so as to achieve product iteration on a “day” basis.
According to the cross-border eye report, SHEIN in the design layout, fabric procurement, production and processing operations and other aspects of the whole ecological chain through the flexibility, the public has formed from design to production in 14 days, from production, sales to logistics in 7 days supply chain efficiency system, with digital, scale and intensive way to reconstruct the supply chain.
According to Guosen Securities’ analysis, in the inventory management process, SHEIN adjusts the recommendation and display of products and inventory according to the real-time sales data and forecast model based on the on-demand lean production model, replenishes hot-selling products in a timely manner, and reduces the price of slow-selling products to clear the inventory, so that the sales volume and inventory turnover can be improved.
Years of co-operation with suppliers and flexible transformation of the supply chain have given Shein a certain degree of say in the supply chain system of the fashion category.
Temu states in its lawsuit filing, “As the dominant fast-fashion retailer, SHEIN knew that suppliers needed SHEIN’s sales and its access to the U.S. market, and it was able to coerce its suppliers into arrangements that forced them not to do business with Temu.”
SHEIN does not recognise the charges, stating that “TEMU’s lawsuit has no legal basis” and that the US court has granted a temporary injunction against it v. TEMU for copyright infringement. There are also media interviews with suppliers, the other side said that there is no signed exclusivity agreement, just be notified not to allow price reductions as well as can not be sold in advance in Temu.
Whether or not there is exclusivity, Shein and Temu’s seizure of the supply chain is inevitable.
But it has to be admitted that Temu’s low-priced competitive strategy is disrupting Shein’s original planned course. Previously, in order to improve profitability, SHEIN, which has been taking the cost-effective route, began to consider whether to attract high consumer groups through more expensive goods, and put it into action last year.In the first half of 2019-2022, SHEIN’s customer unit price has steadily increased, and the platform’s customer unit price in H1 2022 has already reached 75 U.S. dollars.
Temu’s brutal incursion into the low-priced women’s apparel market has required SHEIN to spend more time managing suppliers.
SHEIN is no longer just a fashion cross-border e-commerce platform, it is developing in the direction of multi-category. This is another area in which Temu is more specialised. The struggle between the two sides is bound to continue, and the temperature will be even hotter.
